The Top Questions To Ask A Mortgage Lender

The Top Questions To Ask A Mortgage LenderWith many people interested in taking out a home loan, it is critical for potential homeowners to think carefully about which loan structure is right for them. There are a lot of home loan options out there, and potential homeowners need to make sure they consider the benefits and drawbacks of all options. This means asking the right questions. What questions do you need to ask your mortgage lender?

How Big Of A Down Payment Do I Need?

The first question you need to ask your mortgage lender is about the down payment you need to make. A smart rule of thumb is that you need to put 20 percent down for your house; however, this is a large sum of money that many people do not have. If you are buying a home for the first time, you might be able to get a home for 3.5 percent down. Always talk to your mortgage lender about this issue.

Is My Credit Score High Enough?

Next, talk to your mortgage lender about your credit score. The higher your credit score, the easier it will be for you to qualify for a home loan. You may want to talk to your mortgage lender about your credit report to see if there are any inaccuracies that need to be fixed.

Do I Need To Get Mortgage Insurance?

Do not forget to ask your mortgage lender if you need to get mortgage insurance. If you put less than 20 percent down on your house, you might need to get insurance, but your premium should go down as your equity goes up. Then, once you reach 20 percent equity in your home, you should be able to get rid of mortgage insurance. Clarify this with your mortgage lender.

Find The Right Home Loan For Your Needs

These are a handful of the top questions you need to ask your mortgage lender if you are thinking about taking out a home loan. With so many loans available, it is easy to get confused. Remember that the right loan for one person is not necessarily the right loan for you. Your mortgage lender can help you put yourself in the best position possible to be successful. 

How Long Does A Refinance Take?

How Long Does A Refinance Take?If you want to save money on your mortgage, refinancing your house could be a great move. As long as you have plenty of equity and a great credit score, you should be able to qualify for the refinance process. At the same time, you might be wondering, how long will it take you to refinance your house? There are several factors to keep in mind, so be sure to work with a professional who can walk you through the process.

It Usually Takes A Month Or Two

In general, refinancing your home loan will take a month or two. Most refinances will be completed in 30 to 45 days, but every lender is different. It depends on how complicated your mortgage is, the other refinancing applications the lender is processing, and the number of staff they have on hand. If you are in a hurry to refinance your mortgage, you may want to talk with the lender to see how quickly they can process your paperwork.

The Lender Has Several Tasks To Complete

There are several tasks the lender will need to complete before he or she can approve your refinance application. First, the lender needs to make sure you have enough equity in your home to complete a refinance. Then, the lender will also check your credit score to make sure it is high enough to qualify. The loan officer will also make sure your mortgage is not behind. Similar to the original mortgage application, the lender will also have to complete inspections and appraisals before your refinance can be approved. All of these tasks take time, which is why you should anticipate spending a month or two refinancing your home. 

Work With A Professional

Every lender is a bit different, so be sure to talk to the lender ahead of time to understand how long the process takes. If you have a deadline you need to meet, starting the process earlier is usually better. That way, you leave yourself time to address any hurdles that may develop along the way. Refinancing your home loan is a great way to draw cash from the equity in your home, lower the interest rate on your mortgage, and save money.

Why Did My Application For A Refinance Get Turned Down?

Why Did My Application For A Refinance Get Turned Down?If you want to save money on your home loan, you might want to refinance. During the refinancing process, you could secure a better interest rate on your home loan. You could also withdraw cash from your home’s equity value to cover other expenses. Similar to a regular mortgage application, some refinance applications are denied. Why is this the case, and what should you do next? 

Your Debt To Income Ratio Is Off

One of the most common reasons why an application for a home refinance is turned down is that the applicant has too much debt. The lender will not want to refinance a homeowner who has too much existing debt. If you have credit card debt, car loans, or student loans, you may want to pay down some of this existing debt before you apply for a refinance. 

Your Credit Score Is Too Low

Your credit score is still going to play a significant role in your application for a refinance. If your credit score has gone down since you purchased the house, you may have a difficult time refinancing. You should always request a copy of your credit report and correct any issues on that report before you decide to apply for a refinance. 

Your Home Value Has Gone Down

The lender may also deny your application for a refinance if your home has gone down in value. Your home is used as collateral for the loan. If the home has gone down in value, the lender might be worried that the value of the home may not pay off the balance of the loan in the event you start missing payments. You may have to wait for the home’s value to go back up before you can refinance. 

Work With A Professional Team

If you want to refinance your home, it can be frustrating if your application gets denied. Fortunately, that doesn’t mean you cannot apply again. You should work with a professional team that can take a look at your refinance application, figure out why the application was turned down, and rectify the situation. Sometimes, an application is turned down simply because the lender doesn’t have enough information or the application was not filled out properly. 

How Can You Secure A Better Interest Rate When Refinancing Your Home Loan?

How Can You Secure A Better Interest Rate When Refinancing Your Home Loan?If you want to save money on your home loan, you may want to consider refinancing. During the refinancing process, you will replace your existing home loan with a new one; however, you want to secure the lowest interest rate possible. How can you get a better rate on your mortgage during the refinancing process? 

Consider Refinancing Your Home Loan To A Shorter Term

If you can create less risk for the lender, you can get a lower interest rate. One of the ways to do so is to refinance your home loan to a shorter term. If the average interest rate has gone down, you might be able to keep your monthly payments the same while paying off your home loan more quickly. If you can refinance to a shorter loan term, your lender might reward you with a lower interest rate. 

Consider Paying Off Your Existing Debt

You can also secure a better interest rate on your home loan by paying off your existing debt. This includes student loans, car loans, and credit card debt. You might want to use the proceeds from a cash-out refinance to pay off your existing debt. The lender might give you a lower interest rate if you have a better debt-to-income ratio. 

Always Check Your Credit Report Before Refinancing

Your credit score will also play a significant role in your interest rate. Before you refinance, you should request a free copy of your credit report. There might be inaccuracies in the report that you need to correct before you apply for a refinance. Furthermore, if your credit score has gone up since you purchased the home, you might be able to secure a lower interest rate from the lender. 

Secure A Better Mortgage Rate When Refinancing

One of the many benefits of refinancing an existing home loan is that you may be able to secure a lower interest rate. You want to get the lowest interest rate possible, so consider working with a professional who can help you put these tips will work for you. Getting a lower interest rate on your home loan could save you tens of thousands of dollars over the life of the loan. 

 

Making Sure You Are Ready To Take On A Mortgage

Making Sure You Are Ready To Take On A MortgageThere is so much to know when it comes to homeownership that even wading into all of the information can seem overwhelming, but if there’s one thing you need when the time comes to purchasing a home, it’s to be prepared. Here are a few ways that you can ensure you’re ready for what a mortgage entails so that buying your dream home will be a positive experience you won’t regret.

Consider All Of Your Options

Instead of accepting the mortgage that your bank is offering you, it’s very important to do some research and determine what some of the best options out there are for you. While it’s entirely possible that the option pushed forward by your bank will work out, in the days of so much information online it’s silly to go into your biggest purchase blindfolded. Take some time out and read about the products available so that, when the time comes, you can make an educated decision.

Know Your Credit History

Lenders will most definitely be digging through your finances and credit history for anything that might make them leery of your financial state, but you’ll want to be aware of your own standing so that you can be prepared for what this might entail. By getting your credit report and score before going through the process of acquiring a mortgage, you can fix any errors that might be on your credit report so that you’ll be prepared for the result when the time comes for pre-approval.

Plan For The Future Possibilities

If the mortgage amount you are planning on paying seems feasible on a month-to-month basis, it’s certainly a good place to start, but if you not on a fixed rate mortgage, you will need to consider the ever-fluctuating state of interest rates, and you need to prepare for this reality at the same time. It’s important to base the amount you’ll be spending each month off of the income and expenditures that you’ve worked out in a budget, but you’ll want to add in some wiggle room so that a jump in the rates won’t sink your dream of home ownership.

There are many things to be aware of when starting the process of purchasing a home, but delving into your credit history and doing the necessary background research can make for a smoother experience. If you’re looking for advice on purchasing a home, contact your local mortgage professional for more information.

Does Shopping Around for A Mortgage Pre-Approval Hurt Your Credit Rating?

Does Shopping Around for A Mortgage Pre-Approval Hurt Your Credit Rating?Smart homebuyers know that mortgage rates and terms can vary widely among lenders. While your credit score and history will influence what rates and terms you’re offered, there’s a wide range of flexibility, which means shopping around for a pre-approval makes sense. At the same time, it’s important to minimize credit inquiries to protect your credit rating.

What is Mortgage Pre-Approval?

Mortgage pre-approval is often mistaken for mortgage pre-qualification. Pre-qualification is a process whereby the borrower personally submits their financial information to the lender. Pre-approval is the process whereby the lender does their own vetting regarding the income, debt and credit of a potential borrower. Pre-approvals will involve a hard “hit” to the credit score, due to the inquiry.

Pre-Qualification Doesn’t Guarantee Pre-Approval

Note that just because you are pre-qualified for a certain amount, that doesn’t guarantee pre-approval. So it’s important to go ahead and get the official pre-approval before shopping for a home. This will make you a more attractive homebuyer to sellers. 

Mortgage Hard Inquiries Make Credit Scores Dip

When lenders do a true pre-approval inquiry, it will make the credit score dip temporarily. This is an automatic process that happens because it looks like the person is looking to get more credit, which they are. Small drops from hard inquiries are temporary and will bounce back up in a short period of time.

Mortgage Inquiries Don’t Count

However, mortgage inquiries now don’t count on a credit rating, anymore. Lenders know that borrowers will be shopping around for the best rates and terms. As long as the inquiries take place in a short period of time, the inquiries will count only as one single hard inquiry, rather than multiple hard inquiries. In the event that multiple hard inquiries are noted on a credit report, as long as they are all from the same type of lender—a mortgage lender—it won’t count against the borrower.

The bottom line is that it’s wise to get multiple quotes when shopping for a mortgage. It’s more important to have a long-standing history of paying bills on time and managing credit well, than it is to worry about mortgage “hard inquiries.” Your real estate agent will help you to navigate getting multiple quotes in a short time span. Contact your agent to learn more.

What Is A High Enough Credit Score For A Mortgage?

What Is A High Enough Credit Score For A Mortgage?There are many people who are interested in purchasing a home for the first time. Even though many first-time homeowners are interested in the sticker price of a home, it is just as important to consider credit scores. Anyone who requires financing to purchase a home will have to go through a credit check. What credit score is considered high enough for a home loan? What do people have to do if they want to increase their credit scores?

What Credit Bureaus Do Lenders Use?

First, a credit score is a reflection of someone’s overall financial health. A lender wants to make sure someone has the ability to pay back a mortgage before they give that person a home loan. The higher someone’s credit score is, the more likely the lender believes he or she will have that loan repaid. 

In general, there are three major credit bureaus. They include Experian, TransUnion, and Equifax. Most lenders are going to run something called a triple merge (or a trimerge) when they check someone’s credit. This means the lender is going to check someone’s credit score with all three major credit bureaus before deciding if someone should receive a home loan. All three major credit bureaus calculate credit scores using the Fair Isaac Corporation, or FICO, numbers, but they calculate credit scores slightly differently. 

What Is Considered A Solid Credit Score?

Every lender has a slightly different metric, but a credit score less than 580 is considered poor. In contrast, a credit score over 800 is considered excellent. The maximum credit score someone can have is 850. If a loan is given to someone with a score under 620, this is considered a “subprime” loan. It is possible for people to qualify for a home loan with a low credit score, but they may be facing a higher interest rate.

Those who are interested in raising their credit score should pay all of their bills on time. It is also important for individuals to pay down as much of their debt as possible before applying for a home loan. This could help them increase their credit scores and get approved for a loan with a solid interest rate. 

 

Boosting Your Credit Score To Qualify For Better Rates

Boosting Your Credit Score To Qualify For Better Rates

The better your credit score, the better the mortgage interest rate for which you should qualify. That can mean thousands of dollars saved over the life of the mortgage. If your credit score needs improving, get started prior to your search for a new home.

Pay Bills On Time
The simplest way to boost your credit score is by ensuring your bills are always paid on time. Nothing harms a credit score more than late payments.

Check for Credit Report Errors
Check your credit reports for any errors. These issues are not uncommon, and can really impact your score. Each of the three major credit card reporting bureaus –Equifax, Experian, and TransUnion –will provide you with a free annual report.

Credit Utilization Rate
Look into your credit utilization, or CU, rate. The CU rate is another big credit score consideration. Your CU rate is the amount of credit authorized versus the amount you use. It’s one reason maxing out your credit cards is not a wise move.

Never allow your CU rate to exceed more than 30 percent of your available credit. In simple terms if you have $1,000 in available credit, never use more than $300. High CU rates are a red flag, as they indicate someone with potential financial problems. For best results, keep your CU rate as low as you can.
Calculate your CU rate by adding up the credit limits on all cards, as well as the balances. Divide the total balances by the total credit limit, then multiply by 100. That amount is your CU rate percentage.

Reduce Your Debt
If you carry credit card debt, pay it down as much as possible. That also helps lower your CU rate.

Avoid Opening New Credit Card Accounts
Do not open new credit card accounts while trying to boost your credit score.   A new account lowers the age of your accounts, affecting your credit history and lowering the CU rate.

Do Not Close Unused Credit Card Accounts
Do you have credit cards you never use? You might think closing them would boost your credit score, but that is not how it works. When you close the account, the amount of credit you have drops. That triggers a CU rate increase.

Refinancing Credit Card Debt
If you have substantial credit card debt, consider refinancing all of it with a personal loan. You should receive a lower interest rate with your balances now merged into a single monthly payment. This also causes your CU rate to go down.

How Long Will It Take?
How long it will take to improve your credit score depends on the severity of your credit problems. Those with serious credit issues may find it takes years to raise their scores significantly, but most people should see improvement within a few months. Then it is time to think about mortgage shopping!

What Are The Most Common Mistakes Homeowners Make When Refinancing?

What Are The Most Common Mistakes Homeowners Make When Refinancing?There are lots of people who are looking to take advantage of low interest rates to refinance their homes. This provides homeowners with an opportunity to save tens of thousands of dollars over the life of the loan. It could also allow homeowners to access equity to finance a home renovation or shave years off their mortgage. On the other hand, there are also a lot of people who make mistakes during the refinancing process. What are some of the mistakes that everyone should make sure they avoid?

Avoid Saying Yes To Loan Forbearance On A Mortgage

First, try to avoid mortgage forbearance if you can. If homeowners decide to pursue mortgage forbearance, they might have a bit of extra cash on hand because they will be able to skip a few payments. On the other hand, this could signal that the homeowner has issues related to his or her cash flow. As a result, homeowners might not get the best offer possible when they apply to refinance their mortgage down the road.

Always Check The Credit Score Before Applying

Next, homeowners should always check their credit scores before they decide to apply for a refinancing opportunity. It is not unusual for people to have mistakes in their credit scores. Nobody should have to pay for someone else’s financial mistakes. Homeowners have to remove these inaccuracies from the credit report before they apply for a refinancing opportunity. That way, homeowners have access to the best terms possible.

Check The Estimate Before Agreeing To A Refinance

Finally, homeowners also have to check the estimate before they agree to a refinance. Even though there are opportunities to save a lot of money, there are other fees involved. These could include points, origination fees, and other fees that could be included in closing costs. Homeowners have to be ready to pay these costs if they are going to refinance their loans.

Avoid These Mistakes When Refinancing

These are a few of the most common mistakes people make when they go through the refinancing process. By avoiding these mistakes, homeowners can place themselves in the best position possible to save money by refinancing their loan to more favorable terms.

A Late Payment: Credit Score Impact

A Late Payment: Credit Sore ImpactThis has been a difficult year for everyone. There are a lot of people who are worried that they might not be able to keep up with their mortgage payments. Small businesses have had to close their doors and numerous individuals have been laid off from work.

It is important for homeowners to understand that banks do not want people to foreclose on their homes either. Therefore, they are often willing to work out an alternate payment plan with homeowners who are struggling due to dire financial situations. Those who are late on a mortgage payment might be wondering how this is going to impact their credit score. The answer is that it depends. 

How Does A FICO Credit Score Work? 

Someone’s credit score is a conglomeration of multiple factors including payment history, the amount of money owed, the length of the credit history,  and new credit. A late or missing mortgage payment is only going to impact one of these categories. Unfortunately, this also happens to be the largest factor, making up more than a third of the total credit score. 

A Late Mortgage Payment

First, it is important for everyone to know that a late payment is not going to impact someone’s credit score until it is late by more than a month. At the same time, people need to remember that the lender can still access a late fee. If someone has a high credit score with a long credit history, this late payment is not going to hurt as much. On the other hand, someone with a poor credit score and a short credit history might feel the sting a little bit more. 

Furthermore, it is important for people to note that a payment that is late by 60 or 90 days is going to hurt someone much more than a payment that is late by just one month. Therefore, even if a payment is going to be late, people should still try to pay it as early as possible.

Protect The Credit Score

It is important for everyone to try to do everything they can to protect their credit score. If they are worried they are not going to be able to make a mortgage payment, they should let the lender know and see what their options are.